If you drove to work hearing Howard Stern in your Ford Mustang, consider yourself unloved.
There were 270.5 million shares of Ford sold short as of mid-January. Sirius follows with 219.6 million shares looking to profit from a tumble. The S&P 500 SPDR
Yes, I am going by share volume. That will naturally gravitate toward a list of low-priced stocks. In terms of actual dollars at stake, the 142.5 million shares of General Electric
However, the venom is undeniable. Why do so many investors feel that Ford and Sirius are destined to head even lower than they already are?
Ford posted the worst annual loss in its 105-year history last week, but it still hasn't tapped bailout funds the way that domestic rivals Chrysler and General Motors
Sirius is also facing some serious debt issues this year, but at least it can point to its growing subscriber base. Despite the automotive industry's shortfalls, cutting Sirius off from its most dependable source of new subscribers, the company's outlook calls for improving cash flow on a larger subscriber base this year.
Pessimism can work out nicely with heavily shorted stocks like Ford and Sirius. If catalysts of optimism arise, the stocks can begin moving higher in a hurry under what is called a short squeeze. Since shorts need to buy to cover their short positions, it can lead to a frenzied rally if it catches on. Because shorts face greater than 100% losses if a stock skyrockets, they tend to cover quickly. Ford and Sirius have enough challenges in 2009 to make short squeezes unlikely, but isn't that the result of all of the negativity already baked in?
Be careful out there, naysayers. When the mob turns, make sure you're not one of the last ones out.
Some other tall tales and short stories:
Longtime Fool contributor Rick Munarriz is such a fan of satellite radio that he subscribes to both Sirius and XM. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.